Our Latest Investment is Australian Mines Ltd (ASX: AUZ)

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 14,730,000 AUZ Shares at the time of publishing this article. The Company has been engaged by AUZ to share our commentary on the progress of our Investment in AUZ over time. This information is general in nature about a speculative investment and does not constitute personal advice. It does not consider your objectives, financial situation, or needs. Any forward-looking statements are uncertain and not a guaranteed outcome.

Our latest Investment is Australian Mines (ASX:AUZ).

AUZ owns a development stage scandium asset in Australia.

We think scandium demand is going to surge - and we may not even know why... yet.

(What? Explanation a few lines below)

AUZ is right next door to $3.2BN scandium developer Sunrise Energy Metals that is up 80x in the last 18 months...

and just popped as high as 29% a couple of days ago after this happened:

(past performance is not an indicator of future performance)

(listen to it here)

Big money from the Department of War into a tiny rare earth mineral that many have never heard of - scandium.

There is a lot of talk about different critical minerals the US is trying to secure.

And a lot of publicly available information and pundit commentary on supply and future demand.

BUT if we look at where the USA is throwing the most money and the most quickly...

THAT is where we start to think about what the public DOESN’T know about supply and projected demand.

(especially for military and advanced weapons uses)

What we do know - Scandium makes aluminium stronger and weldable for fighter jets, missiles, drone frames etc.

It’s also critical for fuel cells that power AI data centres... and how many of those are about to get built around the world.

Currently the world produces only ~80 tonnes of scandium per year, and...

(you guessed it)

China's got most of it (80% of supply, 100% of processing)... and has placed an export ban on it.

So that leads us to the news from 82 hours ago, when the US Department of War announced US$400M funding for a scandium project all the way over here in Australia.

The project that got a direct mention from President Trump and is all over the news in the last 24 hours:

(sources)

And ~12 months before that, the biggest defence contractor in the world - Lockheed Martin - signed an option for offtake from that same project.

AUZ is directly next door to this project AND its resource is higher grade - why this matters in a second.

The USA must be dead serious about securing scandium supply ASAP.

Sunrise Energy Metals, the company receiving all this attention, is now capped at nearly $3.2BN and is up ~80x in the last 18 months.

Yep ~80x.

Sunrise is the best performing mining stock in the world over the past ~18 months and is backed by billionaire mining maverick, Robert Friedland.

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Our Investment - AUZ - is also ASX listed, sits next door to Sunrise, on the same geological structure.

(source)(source)(source)(source)

AUZ owns 100% of one of “the highest grade scandium resources in the world”.

Yes, even higher grade than $3BN Sunrise’s asset - and grade IS king with scandium.

AUZ’s asset is at an advanced stage with an identical production target to Sunrise’s asset.

A 2026 scoping study demonstrated the project can deliver a Net Present Value (NPV) of US$860M from US$125M CAPEX.

That NPV number is based on a scandium price of US$3,000/kg.

Well below the price the US Defense Logistics Agency (DLA) is paying for stockpiled material at ~US$6,250/kg. (source)

At US$6,000 per kg AUZ’s project NPV is ~US$2.04BN.

(source)

So AUZ’s valuation is somewhat tied to the scandium price.

Here are the studies side by side:

(source)

Sunrise is capped at ~$3.2BN.

AUZ is capped at ~$58M with ~$5.2M cash (at June 30th).

Our AUZ Investment thesis is:

With the sudden USA (and global) attention and capital flowing into the neighborhood for scandium...

And a $3BN, “directly next door” neighbour getting cheques and mentions from Donald Trump...

And with a higher grade resource...

We think the $58M capped AUZ could quickly enter the global “attention and capital for scandium” slip stream in a big way.

(and what DON’T we know about future scandium demand that is causing the US Department of War to throw so much money at it so quickly?)

We are Investing in AUZ to see it start to bridge the gap between its valuation and its $3.2BN next door neighbour.

(no guarantees of course, this is pre revenue, high risk, small cap mining investing, anything can - and probably will - happen.)

At 11AM today, AUZ Managing Director Andrew Nesbitt will be holding a webinar to discuss developments in the scandium thematic, and what AUZ is doing.

We will be tuning in:

Register for the AUZ Webinar here

Keep reading to see:

• What is scandium and why we like it
• Why we think AUZ’s asset is comparable to $3.2BN Sunrise
• Why the Sunrise Robert Friedland factor is a positive for AUZ

But first, here are the 10 reasons we Invested in AUZ and our Big Bet:

10 Reasons we Invested in AUZ

1. AUZ has one of the highest-grade scandium resources in the Western world

There are only three known primary scandium deposits with grades above ~300ppm on the planet.

AUZ owns one of them and out of the three, has the highest grades.

Scandium is always found in tiny amounts, trace amounts in the earth’s crust.

Grade is good because typically, it means the lowest cost, highest margin asset (when developed and in production).

Here is how AUZ’s grade stacks up against Rio and Sunrise’s assets:

• $58M AUZ - 446ppm
• $3.2BN Sunrise Energy Metals - 408ppm
• $292BN Rio Tinto - 405ppm

2. AUZ’s neighbour has 80x’ed in the last 18 months

AUZ’s neighbour Sunrise Energy Metals was the best performing mining stock of 2025.

Its share price is up >80x in the last 18 months.

(past performance is not an indicator of future performance)

AUZ and Sunrise share the same 60tpa planned output, a similar mine life, similar capex AND both assets sit on the same geological intrusion.

AUZ is capped at $58M, Sunrise at $3.2BN.

AUZ is two study-stages behind (PFS and reserves) - so as its project gets de-risked we think its valuation gap to SRL could close.

(source)

3. AUZ’s neighbour has an offtake option with Lockheed Martin and a US$400M loan commitment from the US government

AUZ’s neighbour has done deals with:

• $139BN defence contractor Lockheed Martin for scandium offtake, AND
• The US government for US$400m in loan funding to build its project.

We think US funding proves real buyers want the world’s first primary scandium mine built.

Which can only be good for any other scandium assets in this part of the world...

We think AUZ could capture some of the attention and market interest in Sunrise and reach critical mass to progress its own project.

(source)(source)(source)(source)

4. AUZ’s project has a scoping study with an NPV of up to US$2BN

AUZ’s asset is advanced stage with a 2026 scoping study showing a Net Present Value (NPV) of US$860M from US$125M CAPEX.

That NPV number is based on a scandium price of US$3,000/kg - well below the price the US Defense Logistics Agency (DLA) is paying for stockpiled material at ~US$6,250/kg. (source)

At US$6,000 per kg AUZ’s NPV is ~US$2.04BN.

(source)

5. Scandium is a critical mineral dominated by China who has export controls in place

China controls ~80% of scandium mining and ~100% of processing. (source)

China has had export controls in place on every form of scandium since April 2025. (source)

6. Scandium is used in AI data centres (the biggest driver of demand)

~74% of current global scandium demand is from one company - Bloom Energy.

Bloom makes the fuel cells that power AI data centres - each GW of fuel cell capacity requires ~45 tonnes of scandium oxide.

Bloom’s target is 2GW of capacity by year end and estimates are for 5GW by 2030.

IF any of that eventuates, Bloom would require multiples of last year’s scandium production (~80 tonnes).

(wonder what the US Department of War thinks about this)

7. Scandium also has military applications

A small amount of scandium in aluminium makes it a stronger and much lighter alloy.

Essential for fighter jets, missiles, hypersonics and 3D-printed aerospace parts.

And these are just the advanced weapons applications of scandium that we know about.

This is why US$139BN Lockheed Martin has been locking in its future scandium supply:

(source)(source)

Lockheed Martin is just one military contractor from one country - there are many more around in the USA and around the world.

And this is before we get into the on site fuel cells that are powering AI data centres.

8. We think AUZ’s asset is suited to a US listing or M&A

The US Department of War, Lockheed Martin and Robert Friedland have spent 18 months talking about scandium.

Friedland, Lockheed, the DoW and the White House have done all the scandium education.

Which we think makes AUZ’s project an easy to understand US suitable asset.

Especially for a SPAC ("special purpose acquisition company”).

SPACs are listed “shell companies” on a US exchange with no assets, a big cash balance AND a ~18-24 month deadline to find and buy a real asset/project.

US$1BN+ of fresh SPAC capital is hunting critical minerals assets that US investors already understand.

Structurally, SPACs, need the public to understand an asset and get behind it otherwise they don't work.

We think AUZ’s asset fits that criteria.

9. AUZ went to a ~$235M market cap before on one of its other projects

During the 2017-18 battery metals boom (the little one BEFORE the big bull run) , AUZ ran from a ~$30M market cap in August 2017 to ~$235M within about four months - up as much as ~760%.

(past performance is not an indicator of future performance)

That was for its advanced stage (Sconi) nickel-cobalt project in Queensland.

We actually wrote an article about that asset waaay back in 2017 - (source - Long-time readers may remember it)

AUZ still owns that asset outright on granted mining leases - so it could come good if nickel and cobalt prices went on a big run.

10. We also like AUZ’s Brazil gold project too

AUZ is earning up to 80% of a gold project in Brazil, in a region that’s produced over 30M ounces.

The project already has a ~336,000 ounces historic foreign resource estimate.

With some monster drill hits: 104.5m @ 1.59 g/t and 29m @ 3.22 g/t.

With gold near all-time highs, we think this project can get bigger... and could underpin a big chunk of AUZ's ~$58M market cap.

Ultimately, we are hoping the reasons above contribute to AUZ delivering our Big Bet as follows:

Our AUZ Big Bet:

"AUZ re-rates to a $500M+ market cap by advancing its scandium project toward a development decision and/or becomes the subject of a corporate transaction (takeover, JV, or US-listing event) at multiples of our Initial Entry Price."

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is no guarantee that our Big Bet will ever come true. There is a lot of work to be done, many risks involved, including development risk and commodity price risk - just some of which we list in our AUZ Investment Memo.

Success will require a significant amount of luck. Past performance is not an indicator of future performance.

But wait, what is scandium?

And why is both the US Department of War and Lockheed Martin going so hard at it?

Because scandium is one of the world’s most valuable aerospace, defence materials and it helps power AI data centres.

And surprise surprise... China controls ~80% of scandium mining and ~100% of processing. (source)

China has had export controls in place on every form of scandium since April 2025.

(source)

Scandium is a core material in fuel cell tech developed by US$62BN NYSE listed Bloom Energy - used to power AI data centres.

Bloom Energy has recently and rapidly become the largest consumer of scandium on the planet - for powering AI datacentres

Bloom Energy makes mini, modular, power plants that sit on-site, which give big buildings like AI data centres non-stop electricity without burning fuel.

Investors have driven Bloom to a US$62BN market cap in the hopes Bloom Energy’s solid-oxide fuel cells can solve the severe electricity bottleneck facing AI data centers.

Bloom recently became a darling of the AI stock boom because its fuel cells might provide data centers with “behind-the-meter” power.

Check out how their technology works in this explainer video here:

(source)

Bloom counts Amazon Web Services and Oracle as clients.

Here’s where scandium comes in:

Each Bloom fuel cell is made up of ~10% scandium oxide (locked by Bloom’s patents). (source)

Bloom had ~US$1BN revenue last quarter, has a ~US$20BN backlog and is ramping up to manufacturing ~2GW of fuel cells by the end of this year.

Each gigawatt of Bloom fuel cells needs ~25-60 tonnes of scandium. (source)

The entire global production capacity was ~80 tonnes of scandium last year. (source)

IF Bloom hits Wall Street's 5GW-a-year estimate by 2030, scandium demand ~3x's to ~225 tonnes per year.

The whole scandium market could triple in under four years, off ONE single company's demand.

Of course, this is a forecast only - no guarantees it triples - this is a niche commodity.

Scandium is also a critical input into aerospace, defence and automotive sectors.

The problem is, the West has no secure supply chain, so it can't experiment on those “potential applications”.

The way we see it, fuel cell tech demand alone justifies bringing new mines online.

The “defence applications” are the big blue sky upside to demand.

IF scandium can help power data centers at lower temperatures and more efficiently we can think of a lot of military applications for that type of material...

(drones, AI robots you get where we are going)

No wonder Lockheed Martin and the Department of War are circling AUZ’s neighbour...what do they know that we DON’T know about how much scandium they will need?

IF the US can build a reliable Western scandium supply chain, then who knows what gets built around that source of supply.

AUZ’s project - despite all of the interest that’s gone into its neighbour Sunrise - is actually the highest grade scandium asset in the world.

It also just so happens to share the same geological structure with Sunrise - in the world’s “scandium valley”:

Up until now, there has never been a primary scandium mine built anywhere in the world.

Once built Sunrise’s project will be the first.

Sunrise has done very well getting “US national champion status” - probably a function of billionaire Robert Friedland being a non-exec director there.

Friedland is like the Elon/Steve Jobs of mining, so it makes sense he is able to get Sunrise’s project in front of the right people (at the right time).

We think Sunrise’s assets are great.

BUT there is no disputing AUZ’s project is one of the highest grade scandium resource in the world...

It's also very advanced with a scoping study showing a Net Present Value (NPV) of US$860M based on a 28 year mine life.

(That NPV number is based on a US$3,000/t scandium price - The US DLA is buying scandium for its strategic stockpiles at ~US$6,250 per kilo) (source)(source)

At US$6,000 per kg AUZ’s project NPV is ~US$2.04BN.

(source)

So - AUZ’s asset has Sunrise’s beat on grade.

Another kicker for AUZ is its scoping study being based around mining ONE big open-pit and two pits alongside it, as opposed to the 13 separate pits Sunrise has in its feasibility study.

(we are not mining experts, but building fewer pits that are higher grade sounds a lot simpler than having 13 different pits being mined at once)

Of the three big projects in this part of NSW it is the smallest in terms of tonnage BUT the highest grade (versus Rio and Sunrise’s assets).

(source)

Fortunately, for AUZ, scandium is one of those commodities where size doesn’t really matter because right now the market is relatively small.

The entire world produced ~80 tonnes of scandium oxide last year. (source)

When the market is that small, you don't need a monster deposit AND grade probably matters a lot more...

For context - $3.2BN Sunrise’s feasibility study has its project producing ~60 tonnes per annum of scandium oxide for 32 years.

AUZ’s scoping study has the same ~60 tonnes per annum for 28 years. (source)

SRL is capped at ~$3.2BN

AUZ is capped at ~$58M.

That's a ~55x gap between two projects that we think aren’t that far apart from one another.

Here is a side by side of the feasibility studies for projects in the region:

(source)

(Sunrise’s asset is more advanced in terms of feasibility studies but AUZ does have a PFS incoming so that gap could be closed relatively quickly)

We Invested in AUZ because its asset is higher grade than $3.2BN Sunrise’s - which we think will open the door for this asset ending up in the US (either via takeover or listing).

Like Sunrise is executing almost perfectly...

Robert Friedland has been pretty public about wanting to take Sunrise to the US - here is what he said after the funding deal over the weekend:

"It may become an American company. Uncle Sam likes these companies to be domiciled in the United States." (source)

The positive read through for AUZ is that Friedland's spent the last 18 months educating the world (and anyone interested in mining in the US) on scandium and this part of NSW...

Friedland educating the US on scandium is good for AUZ because... SPAC’s...

A big part of why we like AUZ is because we think its got an asset that could eventually make its way over to the US.

One way it could do that is by becoming the target asset for a US SPAC looking for critical minerals assets.

(a SPAC - "special purpose acquisition company" - is a pile of investor cash listed on a US exchange with no assets AND a ~18-24 month deadline to find and buy a real asset)

The people who put together these “SPAC’s” basically need to find assets their investor base’s understand and are willing to stay the course on and back.

Otherwise, the investors can just ask to be repaid (with interest) and the SPAC fails...

The SPAC deals that do end up working are the ones where investors understand the asset, understand the upside, and choose to hold on.

Which means the perfect SPAC target is an asset that requires ZERO education...

... thanks to:

• Billionaire Robert Friedland (almost like Steve Jobs or Elon Musk for mining) talking about scandium constantly for over two years.
  
• Major defence contractor Lockheed Martin doing an option deal for scandium offtake
  
• The Defense Logistics Agency stockpiling scandium at ~US$6,250/kg.
  
• US$62BN Bloom Energy pitching its whole AI data centre business on scandium,
  
• A tiny small cap ASX listed company 80 bagging off a scandium asset, AND
  
• Then over the weekend the, US president Trump announcing a US$400M loan for a scandium asset....

We think a scandium story will be a fairly easy one to pitch to US SPAC investors...

Especially for AUZ’s asset - the highest-grade undeveloped scandium deposit in the West.

We have also seen record amounts of cash raised by SPAC’s to do critical minerals deals.

Inside the last ~12 months there have been ~11 SPACs registered for “critical minerals, metals or mining” as their target sector.

So far of that 11, six have raised ~US$1.33BN - all looking for assets...

(source - we used AI to put this list together, thanks AI)

One of the SPAC’s on the list above is Evolution Global Acquisition, backed by Tribeca, Terra Capital and Evolution capital. (source)

Which has two links to AUZ:

• Tribeca who are on AUZ’s register - came into AUZ at 2.8c back in May, AND
• Evolution Capital who put out research coverage on AUZ.

We think AUZ’s asset could be a prime target for a SPAC.

Especially when NPV numbers like $2BN are being thrown around and there is a success case in the market capped at $3.2BN...

We also think it makes a lot of sense given the ASX is good at funding discoveries and de-risking assets on the smell of an oily rag.

And US markets are good at paying up for de-risked, strategic assets and funding them into production.

(like what’s happening with Sunrise - AUZ’s neighbour - right now)

The two ways we think this can play out for AUZ

First - there is the obvious argument that AUZ and SRL come together and go to the US as a combined entity.

(The two projects sit on the same intrusion so it would make sense)

A logical endgame for the district could be one integrated scandium hub with SRL as the handpicked vehicle as the "US (and western) national champion"

BUT we are NOT Invested in AUZ just hoping for a takeover.

We are Invested to watch AUZ push hard, go it alone, and get re-rated on its own catalysts:

• AUZ has a Pre-Feasibility Study (PFS) due in ~6 to 9 months
• Offtake and strategic partner discussions underway, and
• Drilling results around its resource and more metallurgical testwork.

(source)

We want to see AUZ execute something similar to SRL’s playbook - maybe a deal with Bloom directly (the biggest scandium consumer in the world) OR another big defence contractor.

AND then grow its market cap to a level high enough to take AUZ to the US...

We think US critical minerals are about to have their “2020-2022 lithium” moment...

We have been writing about the wave of US capital we think is about to come into ASX listed critical minerals stocks for over two years now.

And on Monday we made the call that US critical minerals as a macro thematic entered late stage three (and possibly early stage four) this weekend.

The part of the cycle where critical minerals stocks will let loose and run really hard...

And the part of the cycle when the US government (and defence contractors/industry participants) really start going hard in the sector.

Check out our two latest pieces on US critical minerals here:

• Trump hosts mining roundtable - announces over $2BN in investments. Here’s how we are positioned.
  
  
• US Critical Minerals - Is the Second Wave Starting Now?

Investment Memo 1: Australian Mines (ASX:AUZ)

Memo Opened: 12-08-2026

Shares Held: 14,730,000

What does AUZ do?

Australian Mines (ASX:AUZ) owns 100% of the highest-grade pure-play scandium resource in the Western world.

AUZ also owns:

• An 80% earn-in right to a gold project in Brazil with a 336koz historic foreign estimate, and
• An advanced stage nickel-cobalt project in Queensland

What is the macro theme?

Scandium is used in Ai data centres and has military applications in fighter jets, missile systems and Ai robots.

China controls ~80% of production and ~100% of processing with export controls on anything leaving the country;

The US government response is to fund the world's first primary scandium mine... 15km from AUZ's project.

AUZ’s project is the highest grade deposit in the western world.

Our AUZ Big Bet

"AUZ re-rates to a $500M+ market cap by advancing its scandium project toward a development decision and/or becomes the subject of a corporate transaction (takeover, JV, or US-listing event) at multiples of our Initial Entry Price."

The 9 reasons we are Invested in AUZ

1. AUZ has one of the highest-grade scandium resources in the Western world
2. AUZ’s neighbour has 80x’ed in the last 18 months
3. AUZ’s neighbour has an offtake option with Lockheed Martin and a US$400M loan commitment from the US government
4. AUZ’s project has a scoping study with an NPV of up to US$2BN
5. Scandium is a critical mineral dominated by China who has export controls in place
6. Scandium is used in AI data centres (the biggest driver of demand)
7. Scandium also has military applications
8. We think AUZ’s asset is suited to a US listing or M&A
9. AUZ went to a ~$235M market cap before on one of its other projects
10. We also like AUZ’s gold project too

What we want to see AUZ achieve next

Objective 1: Progress the scandium project through to development

We want to see AUZ progress its scandium project through to being development ready. The next major catalyst being a Pre Feasibility Study (PFS)

Here are the milestones we are tracking:

✅ PFS formally commenced and fast-tracked (May 2026)

🔄 Mine optimisation, metallurgical testwork, infrastructure

🔄 Assessment of 180tpa scale-up case

🔲 PFS completed (~Q1/Q2 2027)

Objective 2: Commercial progress for scandium asset

We also want to see AUZ execute the SRL playbook and convert:

🔄 Offtake / strategic partner discussions

🔲 First offtake, MOU or government-linked funding

Objective 3: Corporate - progress toward a US facing listing

This one is all about building up the company to get listed on a major US stock exchange OR become a takeover target for one of the big US listed critical minerals players (OR SPAC’s).

This one is out of AUZ’s control to some extent but we would like to see some progress toward a listing.

Objective 4: Progress on gold project in Brazil

We want to see AUZ complete its earn-in for 80% of the project and convert the existing historic foreign resource estimate (~336k ounces) into JORC status.

Here are the milestones we are tracking:

✅ 14 new gold targets identified (July 2026)

🔄 6,000-10,000m two-rig drill program (from ~Aug/Sep 2026)

🔲 Maiden JORC resource at VG1 (early 2027)

What could go wrong?

Funding / dilution risk

AUZ is a pre-revenue explorer. More capital will be needed well before production, and if it comes as equity at low prices, existing holders (including us) get diluted.

Single-customer demand risk

The scandium demand story currently leans heavily on ONE company - Bloom Energy.

If Bloom's ramp up slows OR if it engineers scandium intensity down (its own patents describe "thrifting"), the urgency behind Western scandium supply could deflate.

Metallurgical / recovery risk:

The scoping study assumes a flat 90.8% scandium recovery - above what peers like Sunrise have in their studies (~88%). If PFS testwork lands materially lower, project economics could take a hit.

"Next-door" dependence risk:

Part of the AUZ thesis rides on SRL's momentum. Any re-rate lower in SRL’s share price could impact sentiment on AUZ.

Commodity price risk:

Scandium has no exchange price - sales are contract based. Today's US$3,000-6,250/kg Western reference prices could soften if China relaxes export controls (or if US-China tensions ease).

Market risk

Broader market sentiment could deteriorate, particularly for small-cap explorers.

If the ASX small-cap market enters a period of weakness, AUZ could struggle to attract the capital and attention needed to advance its project, regardless of the quality of the underlying asset.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Other risks

Like any early-stage critical minerals exploration and development company, AUZ carries significant risk, here we aim to identify a few more risks.

AUZ is still two study stages behind its neighboring peer, and any unexpected delays in delivering its upcoming Pre-Feasibility Study or lower-than-expected metallurgical recoveries could severely impact project economics.

Management bandwidth could easily be stretched thin as the team attempts to simultaneously advance its primary NSW scandium project, execute a multi-thousand-meter gold drilling campaign in Brazil, and maintain its Queensland nickel-cobalt asset.

Because scandium is a tiny, non-exchange-traded niche commodity, market liquidity is minimal, leaving pricing highly vulnerable to delays in technology adoption or shifts in Chinese export policies.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Our Investment strategy

We intend to maintain a position in AUZ for 2 to 5 years, which should be enough time to see the scandium theme to run and see AUZ make progress towards production.

We may look to sell up to 20% of our holding if the company delivers on one or more of our Investment Memo objectives and/or the share price materially re-rates in line with our minimum hold conditions.

Any sell downs will be in accordance with our trading and hold policy disclosure.